Talking Points:

- USDOLLAR Rebounds from Fresh Monthly Low on Risk Aversion

- Japanese Yen Rally at Risk amid Slowing Consumer Price Inflation





Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index







Forex_USD_Rebound_to_Be_Capped_on_FOMC-_JPY_at_Risk_on_Slowing_CPI_body_Picture_3.png, USD Rebound to Be Capped on FOMC- JPY at Risk on Slowing CPI

Chart - Created Using FXCM Marketscope 2.0

  • Retraces Entire Reaction to Non-Farm Payrolls; Lower Low in Place?
  • RSI Bounces Back from Oversold;Retains Bearish Momentum
  • Former Support to Offer New Resistance: 10,470 Pivot
  • Interim Support: 10,290 (38.2 retracement) to 10,321 (78.6 expansion)





Import Price Index (MoM) (SEP)



Import Price Index (YoY) (SEP)



House Price Index (MoM) (AUG)



The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) snapped back from a fresh monthly low of 10,354 and the near-term bounce may turn into a more meaningful correction in the greenback as market sentiment falters.

A spike in China’s benchmark money-market rate appears to be the main culprit behind the risk-adverse flows seen across the financial markets, and the reserve currency may continue to retrace the sharp decline from earlier this week as the Relative Strength Index bounces back from oversold territory.

Nevertheless, the bearish momentum in the RSI may continue to limit the topside for the dollar as market participants see the Federal Open Market Committee (FOMC) maintaining its current policy at the October 29-30 meeting, and the greenback may face additional headwinds over the remainder of the year should the central bank show a greater willingness to carry its highly accommodative policy stance in 2014.

Forex_USD_Rebound_to_Be_Capped_on_FOMC-_JPY_at_Risk_on_Slowing_CPI_body_ScreenShot282.png, USD Rebound to Be Capped on FOMC- JPY at Risk on Slowing CPI


Forex_USD_Rebound_to_Be_Capped_on_FOMC-_JPY_at_Risk_on_Slowing_CPI_body_Picture_1.png, USD Rebound to Be Capped on FOMC- JPY at Risk on Slowing CPI
  • Preserves Wedge/Triangle Formation; Approaching Apex
  • Relative Strength Index Retains Bearish Momentum Dating Back to May
  • Interim Resistance: 99.00 Pivot to 99.20 (23.6 expansion)
  • Interim Support: 96.40 (23.6 expansion) to 96.60 (50.0 expansion)

Three of the four components weakened against the greenback, led by a 0.81 percent decline in the Australian dollar, while the Japanese Yen rallied across the board amid the shift in trader sentiment.

Indeed, the risk-off environment may continue to prop up the low-yielding currency, but the Yen may come under pressure over the next 24-hours of trading should Japan’s Consumer Price report undermine the Bank of Japan’s (BoJ) pledge to achieve the 2 percent target for inflation by 2015.

Nevertheless, the technical outlook certainly highlights further declines in the exchange rate as the bearish RSI momentum continues to take shape, and a stronger-than-expected inflation report may serve as the fundamental catalyst to generate a clearer directional bias for the USDJPY as market participants weigh the outlook for monetary policy.

--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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